What is required for a binding contract is sometimes overlooked by the unwary and even a practiced property investor can sometimes be tripped up.
Even if you do the deal and shake hands with the selling agent and he takes a payment off you for the booking deposit (amount can vary but generally c€5,000.00), telling you the contracts will be on their way to your solicitor very soon, those welcome words are worth almost nothing if there is a change of mind. A binding contract only comes into existence when both vendor and purchaser have signed the contracts and they have been exchanged between the parties.
When the purchaser is asked into his solicitor’s office to look over all the contract documents and actually does sign them there and then and without inserting any loan approval or other conditions – does that make the arrangements binding? No it does not. When the signed contracts are delivered to the vendor solicitor’s offices along with the balance 10% deposit being the full deposit, is there a binding contract now in place? No. There is not and both the vendor and the purchaser should be able to walk away at this stage.
Only when the already signed contracts (unconditionally with balance deposit paid) are also signed by the vendor and returned / exchanged with the purchaser’s solicitor and arrive in the purchasers’ solicitor’s office does a binding contract normally arise.
This state of affairs is less than ideal and can create a situation where the vendor may retain the contracts unsigned by him and try to squeeze a higher price out of the hapless purchaser by indicating he has received a better offer from a third party. Or he may seek to jettison the purchaser altogether and strike a deal with a completely different purchaser who offers more. This is known as gazumping. But if the market is sluggish, it can work for a purchaser too. Before a binding contract comes in to play, a purchaser might discover the roof or chimney needs serious (or minor) repair and hold out for a pro rata reduction on the sale price before he signs the contracts. This is known as gazundering.
All of this comes to an end when the contracts are signed and exchanged between the parties, the full deposit paid and no further changes whatsoever are allowed to the contracts – or such changes are accepted. The size of a deposit is actually irrelevant. Even a huge deposit will not commit the parties until those contracts are signed by everyone and exchanged.
If you have any queries regarding the property contracts please contact us by phone at 061 501100, email Fergal McNamara, property partner at [email protected] or get a call back by completing our contact form so we can provide you with further information or advice.